New York — US gas storage volumes declined more than the market expected in the week ended March 19, prompting a slight rise to the Henry Hub summer strip despite the likelihood of injection season starting a week ahead of schedule.
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Register NowStorage inventories decreased 36 Bcf to 1.746 Tcf for the week ended March 19, the US Energy Information Administration reported the morning of March 25.
The withdrawal was more than the 21 Bcf draw expected by an S&P Global Platts survey of analysts. It was also greater than the 26 Bcf draw reported during the same week last year but still under the five-year average withdrawal of 51 Bcf, according to EIA data.
Regionally, most of the error came from underestimating the gains in demand as part of the long recovery from February's Arctic blast. While there was a slight uptick in total supplies, led by gains in net Canadian imports and bolstered slightly by higher production levels offshore, the tighter balances were mainly a reflection of stronger demand week on week, according to S&P Global Platts Analytics.
The increase of about 400 MMcf/d of supply, which averaged right at 97 Bcf/d during the week, paled in comparison with the 1.7 Bcf/d increase seen on the demand side. Demand was mainly driven by continued gains in LNG feedgas deliveries and home heating demand, possibly the last gasp of winter as markets transition toward the summer injection season.
Storage volumes now stand 263 Bcf, or 13%, less than the year-ago level of 2.009 Tcf and 78 Bcf, or 4.3%, less than the five-year average of 1.824 Tcf.
The storage report added a modest dose of bullish sentiment into the market after a steady downward march the last six weeks. Prompt-month NYMEX Henry Hub April traded about 5 cents higher the morning of March 25 at $2.57/MMBtu, while the balance-of-summer strip added about 3.5 cents of support from the slightly larger-than-anticipated draw from inventories.
With the summer strip now pricing in around $2.69/MMBtu, the outlook sits roughly 10 cents higher than a week ago, but still 10 cents lower than it did two weeks ago, indicating the market is wavering but relatively consistent on the expected price of gas from April onward.
Platts Analytics supply and demand model currently forecasts a 14 Bcf net injection for the week ending March 26, which would stand in stark contrast to the five-year average draw of 24 Bcf. Warmer temperatures this week are driving a 7 Bcf/d decline in total US demand and positioning the markets for what will likely be the final reported storage withdrawal of the season before inventories start to replenish over the next seven months.
